If you’re a Canadian living in the United States, coordinating CPP, Social Security, RRSP withdrawals, and OAS benefits can dramatically impact your retirement income. In this video, cross-border financial planner Bryan Haggard explains the 6 biggest retirement mistakes Canadians make after moving to the U.S.
Many Canadians who move to the United States accumulate retirement benefits in both countries, including CPP, Social Security, RRSPs, IRAs, and 401(k)s. Without proper cross-border planning, retirees can unintentionally trigger OAS clawbacks, unnecessary taxes, or filing mistakes related to FBAR and FATCA reporting.
In this video, Bryan walks through the most common retirement mistakes he sees when working with Canadians living in the U.S. and explains strategies to help optimize retirement income across both tax systems.
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Summary
Meeting summary
Quick recap
Bryan discussed the complexities of retirement planning for Canadians living in the U.S., highlighting six common mistakes that can lead to significant financial losses. He emphasized the importance of coordinating Social Security and Canada Pension Plan benefits, understanding OAS eligibility and benefits, and developing a strategic RRSP withdrawal plan to avoid unnecessary taxes. Bryan also addressed the need for a valid U.S. estate plan, proper tax filing, and accurate RRSP tax withholding for U.S. residents. He concluded by encouraging viewers to download a personalized cross-border benefit estimate to better understand how their retirement benefits may be coordinated.
Summary
Canadians’ Retirement Planning Challenges
Bryan discussed the common retirement planning mistakes made by Canadians living in the United States, highlighting the complexity arising from two different tax systems and retirement accounts. He identified the first major mistake as not coordinating Social Security and Canada Pension Plan benefits, explaining the challenges in determining the optimal timing for claiming these benefits. Bryan advised using totalization agreements between the U.S. and Canada to estimate benefits and emphasized the importance of considering spousal involvement in the decision-making process.
OAS Benefits in Cross-Border Retirement
Bryan discussed common mistakes people make regarding their OAS benefits in cross-border retirement planning. He clarified that OAS eligibility does not require 20 years of Canadian residency after age 18, as clients can combine U.S. work years with Canadian residency to qualify. Bryan also explained that there is no OAS income clawback in the United States, unlike in Canada, and emphasized the importance of understanding OAS benefits for retirement planning.
RRSP Withdrawal Tax Strategy
Bryan discussed common mistakes Canadian expatriates make with RRSPs, particularly poor withdrawal timing. He explained that withdrawing all RRSP funds while still working in the U.S. can result in significant additional taxes, and that failing to address RRSPs during retirement can push people into high tax brackets when combined with U.S. Social Security benefits. Bryan recommended developing a strategic approach to RRSP withdrawals, either by taking all funds out when U.S. income is minimal or withdrawing annually during retirement.
U.S. Estate Planning for Canadians
Bryan discussed a common mistake Canadian retirees make when moving to the U.S., which is not having a valid U.S. estate plan. He explained that while a U.S. will is often necessary, it may not address all assets, including real estate in Canada, and might not avoid probate in the U.S. Bryan noted that some clients might need to consider trusts, though there are complexities involved when beneficiaries or successor trustees are located in Canada.
Canadian Tax Filing Requirements for Americans
Bryan discussed common tax mistakes made by Canadians living in the U.S., focusing on required forms for reporting Canadian assets. He explained that individuals with over $10,000 in Canadian assets (including RRSPs) must file an FBAR annually, while those with over $75,000 in assets (single) or $150,000 (married) must file Form 8938. Bryan emphasized that failing to file these forms can result in penalties of over $16,000 per year, even for non-willful violations.
Canadian RRSP Tax Withholding Mistakes
Bryan discussed a common mistake Canadian expatriates make regarding RRSP tax withholding when taking money out of their retirement accounts. He explained that many Canadians overpay on withholding taxes to Canada, which doesn’t fully translate to U.S. tax returns as foreign tax credits. Bryan highlighted the specific issue of a client who was paying 25% withholding on RIF withdrawals when only 15% was required, resulting in an additional $5,000 in taxes paid unnecessarily. He emphasized the importance of understanding the correct withholding rates for U.S. residents when dealing with Canadian financial institutions.
Cross-Border Retirement Benefits Overview
Bryan, a certified financial planner and chartered financial analyst, discussed the importance of understanding how Canadian and U.S. retirement systems coordinate for Canadians living in the United States. He introduced a personalized cross-border benefit estimate tool designed to help Canadians better understand their retirement benefits, including CPP, Social Security, and OAS. Bryan also mentioned the 6 biggest mistakes Canadians retiring in the U.S. commonly make and encouraged viewers to subscribe for more financial planning strategies.